Obamacare Will Devour Your Pay Raise

Mercer’s latest National Survey of Employer Sponsored Health Plans finds that the cost of employer-based benefits will jump significantly in 2015. Employee-benefits writer Stephen Miller, CEBS, reports:

Employers in the U.S. are predicting that health benefit cost per employee will rise by 3.9 percent on average in 2015, preliminary results from a new survey by Mercer reveal. Cost growth slowed to 2.1 percent in 2013, a 15-year low, but appears to be edging back up. Moreover, a higher percentage of employees signing up for coverage through the worksite could be a wildcard driving costs higher.

The projected increase for 2015 reflects actions employers plan to take to manage cost. If they make no changes to their plans for 2015, they predict that costs will rise by 5.9 percent on average. However, only 32 percent of respondents are simply renewing their existing plans without making changes.

One important change that employers are making is moving towards consumer-driven health plans (CDHPs), coupled with Health Savings Accounts or Health Reimbursement Arrangements. Currently, 6 percent of large employers offer only CDHPs. Within three years, 20 percent of employers anticipate that they will have fully replaced their traditional health insurance with CDHPs.

Some believe that Obamacare is driving this switch. To be sure, we should be grateful that CDHPs are surviving Obamacare, but they have been growing in the employer-based market for years. The real effect of Obamacare is shown in Figure 1: It is eliminating pay raises. Recall that we entered the Great Recession in December 2007, but even then we got pay raises (according to Figure 1). That is ending. All of our increased compensation will be in the form of health benefits, which will not be better, but merely Obamacare-compliant. Isn’t it time American workers took home more of their compensation as wages, instead of paying it to health insurers?

John R. Graham is a former Senior Fellow at the Independent Institute.
Beacon Posts by John R. Graham | Full Biography and Publications
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